Global foreign direct investment recovered to pre-pandemic levels in 2021, but uncertainty lingers in 2022

Foreign direct investment (FDI) flows recovered to pre-pandemic levels last year, reaching nearly $1.6 trillion, but the outlook for this year is bleaker, according to the latest report on the investment in the world of UNCTAD.

The report titled International Tax Reforms and Sustainable Investing said that to cope with an environment of uncertainty and risk aversion, developing countries must obtain significant assistance from the international community.

“The need for investment in productive capacity, in the Sustainable Development Goals (SDGs) and in climate change mitigation and adaptation is huge. Current investment trends in these areas are not unanimously positive,” said Rebeca Grynspan, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD).

“It is important that we act now. Even though countries are facing very alarming immediate problems related to the cost of living crisis, it is important that we are able to invest for the long term.

From a low base in 2020, global FDI flows rose 64% to $1.58 trillion last year, driven by the momentum of booming mergers and acquisitions (M&A) activity and the rapid growth in international project funding due to loose funding and large infrastructure stimulus packages.

While the recovery benefited all regions, almost three-quarters of growth was concentrated in developed economies, with FDI flows up 134% and multinational corporations posting record profits.

Flows to developing economies rose 30% to $837 billion – the highest level on record – largely on strength in Asia, partial recovery in Latin America and the Caribbean and once again in Africa. The share of developing countries in global flows remained slightly above 50%.

The reinvested earnings component of FDI – profits retained in the foreign affiliates of multinational companies – accounted for the bulk of global growth, reflecting the record rise in corporate profits, particularly in developed economies.

The top 10 economies for FDI inflows in 2021 were the United States, China, Hong Kong (China), Singapore, Canada, Brazil, India, South Africa, Russia and Mexico .

outlook 2022

This year, the business and investment climate has changed dramatically, as the war in Ukraine has led to a triple crisis of high food and fuel prices and tighter financing. Other factors darkening the horizon for FDI include further impacts of the pandemic, the likelihood of further interest rate hikes in major economies, negative sentiment in financial markets and a possible recession.

Despite high profits, investment by multinational companies in new overseas projects was still one-fifth below pre-pandemic levels last year. For developing countries, the value of greenfield ads remained stable.

Signs of weakness are already being felt this year. Preliminary data for the first quarter shows greenfield project announcements down 21% globally, cross-border M&A activity down 13% and international project financing deals down 4%.

“UNCTAD predicts that the growth momentum of 2021 cannot be sustained and that global FDI flows in 2022 are likely to follow a downward trajectory, remaining stable at best,” the report said. “However, while flows are expected to remain relatively flat in value terms, new project activity is likely to suffer further from investor uncertainty.”

Variations between regions: overview of Africa, Latin America and industrialized economies

FDI in Africa reached a record $83 billion last year, but this was significantly affected by a single intra-company financial transaction in South Africa in the second half of 2021. Flows increased in Southern Africa, in East Africa and West Africa, while Central Africa remained stable and North Africa. tear down.

Developing Asia, which receives 40% of global FDI, saw its flows increase in 2021 for the third consecutive year to reach a record level of $619 billion. FDI in China increased by 21% and in Southeast Asia by 44%, but South Asia did the opposite, falling by 26% while flows to India fell to 45 billion dollars.

In 2021, FDI in Latin America and the Caribbean increased by 56%, with the 74% growth in South America being supported by increased demand for raw materials and green minerals.

Structurally weak, vulnerable and small economies grew by 15% to 39 trillion, but the inflow to least developed countries, landlocked states and small island developing states combined accounted for only 2.5% of the total in 2021, compared to 3.5% in 2020. The impact of the pandemic has intensified fragility and investments in sectors relevant to the SDGs – in particular food, agriculture, health and education – continued to decline.

“In 2022, FDI flows to developing economies are expected to be strongly affected by the war in Ukraine and its wider ramifications, as well as macroeconomic factors, including rising interest rates,” the report said. “Fiscal space in many countries will be significantly reduced, especially in oil- and food-importing developing economies.”

Investing in the Sustainable Development Goals

After taking a heavy hit in the first year of the pandemic, international investment in the SDGs jumped 70% last year. But most of the growth in the recovery has come from renewable energy and energy efficiency, where the value of projects has reached more than three times the pre-pandemic level.

“Although the 2021 recovery in value terms is positive, investment activity in most SDG-related sectors in developing economies, as measured by the number of projects, remained below pre-pandemic levels” , says the report.

“Across developing Asia, investment in SDG-relevant sectors has increased significantly,” the report said. “The value of international project financing in these sectors increased by 74% to $121 billion, mainly due to strong interest in renewable energy. »

International project funding is increasingly important for Sustainable Development Goals and climate change related investments. Some positive steps in these areas in 2021 could be tested this year.

Announced international project finance deals reached a record 1,262 projects last year and their value more than doubled to $656 billion.

The introduction of a global minimum tax on foreign direct investment will have important implications for the international investment climate, but both developed and developing countries stand to benefit from increased revenue.


The United Nations Conference on Trade and Development (UNCTAD) is the principal United Nations agency responsible for trade and development. It is a permanent intergovernmental body created by the United Nations General Assembly in 1964.

UNCTAD is part of the UN Secretariat and has 195 member countries, one of the largest in the UN system.

UNCTAD helps developing countries to access more equitably and more efficiently the benefits of a globalized economy. We provide economic and trade analysis, facilitate consensus building and offer technical assistance to help developing countries use trade, investment, finance and technology for inclusive and sustainable development.

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